Over time, you may find that customizing reports to answer specific questions results in fewer overall reports. As you can see, the key elements of efficiency measurement lie in a warehouse manager’s ability to look at a variety of indicators to see how they function together best. Efficiency isn’t just about reducing costs; other business objectives, including service quality, still have to be achieved in order to keep existing customers and revenue. For example, let’s consider an IT group that supports a doctor’s office. Rae Ann holds several ITIL and HDI certifications and is a faculty trainer for HDI ITIL and Support Center certification courses. The business metric measures how an operational improvement achieves one of the company's goals. A phrase from Peter Drucker perfectly illustrates the mistake made by this product manager: “There is nothing as useless as doing with great efficiency something that should not be done“. Then measure it again, analyze it and improve it until you get the operational efficiency you want! These will vary depending on the type of organisation. For example, a report entitled, Severity 1 Incident Report is not going to have great significance to the business unless we explain it. This will ensure that operational (efficiency and quality) reports–those that show how efficiently and effectively IT is running–are not given to the business (unless requested) but used internally to improve IT operations. Most likely, your business partners already have questions they’d like to have answered or information that they need to have to help them run or improve business processes in their respective areas. It is achieved by minimizing waste and unemployment while utilizing tec… As explained by Mankins in the Harvard Business Review, efficiency is a matter of producing the same output with less input. Measure of Suitability (MOS) Measure of an item’s ability to be supported in its intended operational environment. Simply measuring performance without having a parameter to know if it is within the expected range, will not help at all. This can save time, reduce costs, and improve performance. Imagine a company that produces shock absorbers for heavy trucks. • Are we growing professional competencies needed for successful service delivery? • Are risks being identified and managed? A good KPI should be easy to measure, make sense to those who are evaluated by it when carrying out the process and have a direct impact on generating value for the customer. Organizational effectiveness denotes the concept of how effectively an organization achieves the outcomes it intends to produce. Your email address will not be published. • What value does the expenditure on IT deliver? The operations manager then looks for work (even if it‘s not needed now) to keep the resource busy. Why the last week of every month? Being transparent and showing improvements helps to build better relationships with the business. • Do we capture organizational knowledge to continuously improve performance? To understand your operational efficiency you need to look at very different measures. For example, a weekly abandoned rate report for the service desk cannot stand alone. Inputs can be operational, capital, and resource expenditures. #HDIchat Recap: What's the Biggest Change in Your Support Center in the Last Year? What is the target they are trying to achieve? Salespeople who deal with clients on a daily basis can give you powerful insights regarding this. Measuring Service Quality as Part of Performance Management, Spring Cleaning: Best Practices for the Daily Grind, Unified IT: Improving the Customer Experience by Moving Beyond the Customer Satisfaction Survey, Build a Service and Support Quality Program That Works. Planning is divided into 2 stages: 1. Value is defined and measured by the business, not IT. To demonstrate the approach, let’s take one of the questions from the business unit managers list and walk through the necessary steps: Is IT helping my team to be more productive? • Are targeted inter-company IT strategies being achieved? When should the service be available? There is nothing as useless as doing with great efficiency something that should not be done. Leverage Ratios Leverage Ratios A leverage ratio indicates the level of debt incurred by a business entity against several other accounts in its balance sheet, income statement, or cash flow statement. Many calls were escalated to resolver teams (which increases the cost per contact and negatively impacts productivity for escalation tiers). Just showing whether it was available or not doesn’t provide enough information. MOSs typically relate to readiness or operational availability and, hence, reliability, maintainability, and the item’s support structure. The office administrators are complaining that patient wait times are too long after lunch and want to know why. Another example could be an availability report for a service. quantifiable value expressing the business performance in a shorter time-frame level Determine whether you already have reports that answer the questions. You can even outsource this type of process. Reports should show that we are succeeding or identify areas for improvement. If it wasn’t, was it due to routine maintenance or an outage? Use the following formula and calculate operator efficiency. Let’s look at an IT example of an IT executive question: Is training before a rollout necessary? Have they increased first contact resolution? An operational KPI is a quantifiable value expressing the business performance in a shorter time-frame level. Once partnerships are established with the business, you should gain support from business partners to ensure that employees are using self-help tools, following IT processes, and adhering to policies. Energy Efficiency A key consideration in the operations of facilities such as data centers is energy efficiency. It is important to have operational efficiency in all of them. How Efficient is Your Operation? Set goals, for example: produce 5,000 shock absorbers per month, or have less than 1% of shock absorbers produced outside the defined parameters. Here is another example. Trending showed a high volume of calls to the service desk after the last rollouts (trended across three rollouts that had similar average numbers of calls—which answers the first question—yes, it is necessary). Net Profit Margin 4. In a month, a drilling machine takes inputs such as labor, electricity, materials and depreciation on the machine itself that cost 50,000 dollars. Additionally, it is important to include what matters to the business. Examples of this include automation accuracy, quality indexes and customer satisfaction. How To Measure HR Effectiveness: Finding The HR KPIs That Matter The Most. They do not need to shine, they have to be efficient in carrying loads and last a long time on our rather rough roads. It can be measured using metrics such as revenue per kwh. • Can we attract and retain the talent needed to support the business? Operational efficiency – it’s not just about cost cutting by Matthew Burrows . If you have to explain your report to someone, you are not getting the message across. Reversing your approach starts with the questions (before considering the data): Keep in mind that any questions regarding business goals, needs, or questions should come from the business, not IT. How can I improve operational efficiency in a college. IT can continue trending and providing additional improvements. In this case, you can measure operational efficiency based on the number of customers acquired versus the cost per customer. Operational effectiveness comes down to all the work that gets executed to provide a customer with what the business promises to provide. Debt Asset Ratio You would need to measure fuel costs and maintenance costs. We’re noticing a trend of processing slowing down Monday through Friday from 5 a.m. EST to 10 p.m. EST at the end of every month. Often, you have the data, but haven’t combined different metrics to tell the story. Although we have plenty of data to use for trending, improving services, and promoting value, many IT organizations struggle to deliver the right mix of metrics and give the right reports to the right audience. Ultimately, efficiency can be measured in time, money, or both. • Do we effectively measure and reward individual and team performance? Here we will focus on the five (5) financial efficiency ratios. However, if the report title is Revenue Impacting Incidents, the importance is clear to the business without explanation! For this, look for opportunities for improvement, such as wastage that you can avoid, delays you can eliminate, or other problems. The goal of any operational effectiveness program is to improve business processes and, ultimately, the customer experience. Many manufacturers still operate preventative maintenance schedules. Hi Carol, maybe you need the help of a consultant. The ‘technical’ way to measure operational efficiency is to calculate the ratio of output gained to the input expended. Follow Rae Ann on Twitter @raeannbruno and connect with her on LinkedIn. But what operating room efficiency metrics should you look at? How can OR leaders measure these metrics? The Importance of Employee Efficiency in Achieving Business Goals. One way to do this is to define what your target market is and which nee… One would require a baseline of how the team works prior to any changes to the IT services. Additionally, determine which metrics and reports measure efficiency, identify improvements, or show results. This combination of reports allows the business/organization to assess current business processes and IT can assess the IT services themselves, then work together to improve the service, performance, or business process. … IT operations could generate a report showing physician availability between 12 p.m. and 3 p.m., but that alone doesn’t answer the question. The efficiency formula is a measure of the efficiency of processes and machines. How many clicks are needed to tackle various business processes (this would require observation and usability testing to establish the baseline)? Based on the business partners’ questions, IT can provide useful business (effectiveness or value) reports–those that are tied to business processes, goals, and impact–that allow the business to make better decisions and recognize the value of IT services. Machine Efficiency Machine efficiency can be measured in terms of energy efficiency or the productive results of equipment. Having the right financial metrics and business performance metrics in place provides you with a consistent flow of data you can use to measuring operational efficiency to streamline effort and increase success. Net Profit 3. Either the structure doesn’t work, the terminology isn’t understood, or the report is not using the right data. So, the first step in being “the best” is to set a goal. What does IT need to know in order to improve services and run efficiently and effectively? Even if you don’t agree, customer perception is reality! Easier said than done. If yes, is it successful? When work is increased on the shop floor, local efficiencies go up and top management is satisfied. In our example, it became clear that the product manager skipped this stage, with disastrous results …. Instead, IT should generate a report (or multiple reports) from different data sources: The report would correlate these data points to calculate average turnaround time, which should provide insight into the cause of the bottleneck and allow the business to develop potential solutions. The incident management module of your service management tool provides invaluable information for all areas of IT; it’s not just about support! • Do IT investments positively impact business productivity or the customer experience? The latter approach uses the value of outputs and cost of inputs. Use reports to provide factual information that drives the right actions and results. Efficiency metrics and reports are those that show that we are staffed appropriately and that we are handling the volume well or are meeting service levels. Another option is to identify all IT services that impact business processes in that department and everyone who works on that team. You’d look at the hours you run the Kubota engine and/or the total miles the Kubota traveled. Although these examples are situational, the same approach works for any type of questions you are trying to answer. Plots of land, types of soil, and varieties of plants were deemed more productive if they had greater product yield. What benchmarks can be used to see how an organization is doing? If they are not, proceed to the next step. Let’s consider the service availability report. For example, consider an IT department that supports POS systems in a fast-food restaurant chain. There are involuntary turnover rates, which is when you are forced to make an employee redundant or you fire someone; this doesn’t necessarily indicate poor team effectiveness, as sometimes circumstances do, unfortunately, increase the turnover rate of a company . And you would have to measure the hours and pay of the person driving the Kubota. The basic formula is a ratio of output to input expressed as a percentage: ... A definition of operational efficiency with examples. Operational performance metrics are measures that we need to evaluate the efficiency of an entire production process. The receivable turnover can also be expressed in days. Measure productivity gains facilitated by IT. • How are IT services impacting my department or business processes? Understand what your customer wants 2. There is no point in knowing that a certain process is not happening in the best way possible and taking no action to reverse it. The ROA looks at how the business is using shareholder assets to earn returns. ), when IT connects the dots between IT services and business success, IT gains credibility and becomes a valued business partner and strategic asset. Maximising capacity utilisation. Before I dive into what I’ll be defining as “productivity”, it’s worth noting that the term is applied to a vast array of different circumstances, each with its own nuance in meaning.First appearing in use in the early 19th century, “productivity” was originally a very focused around agriculture. What results have we seen from recent improvements (and their impact on the business)? Efficiency is getting more output from the same resources or getting the same output from fewer resources. The goal of operations is to run efficiently, provide consistent, high-quality services, and continually improve the customer experience. By establishing best practices and managing knowledge, resources, infrastructure, and communication, an organisation can optimise this to set in place processes that decrease costs and maximise output, thereby, exceeding business goals and … They are used in different industries to track organizational processes, improve efficiency and help businesses to understand and reflect on the outcomes. Operational efficiency is a powerful metric that is used to assess the efficiency of profit earned instead of operational costs. This webinar will focus on how organizations can operate with agility in today’s uncertain environment. Key topics • Common challenges • 10 steps toward operational efficiency • Key performance indicators • Bottom line rewards After many studies, time and money employed, they begin to produce this piece with an effectiveness and operational efficiency the envy of any German or Japanese plant. Quite often, company management is measuring primarily on the input side, e.g., the unit production cost or the man hours required to produce one unit. Your email address will not be published. However, they don’t connect the dots to the value we are providing to the business. After visiting a location, IT learned that once the people taking the orders ring them into the register, they have to click on a button to “post” the order on a screen in the kitchen for the cooks. Measuring Operational Efficiency and Value: Use Metrics to Tell the Business Story, HDI ITIL and Support Center certification courses. Developing the right reports goes beyond completing a task for your performance objectives. Once you know what the business or IT partner wants to know, look at your current reports and metrics to see if they answer the question. Too often, we start with the data and canned reports that our tools provide to develop reports. Finding the most current variation of … To use the examples above, terms like availability and abandoned rate are IT terms, and the value isn’t recognized without adding information to tell the whole story. Gross Profit Margin 2. These reports are usually written from an IT perspective and show how efficiently we are operating. • Does IT deliver on its service level commitments? Find out which processes in your business most contribute to meeting this customer desire Rae Ann Bruno is the President of Business Solutions Training, an organization focused on training and consulting in various areas of ITIL, Knowledge-Centered Support (KCS), service desk improvement, internal marketing, metrics, and ITIL process improvement. Quantify the amount of time IT has helped the business save. Is there an end-of-month business process that all locations in all time zones carry out during that last week? The productivity of labor can measured by revenue per employee. This trend shows that we need to see what’s happening between those hours that is impacting processing time. • Is training before a rollout necessary? Which processes in your business generate more value for the customer? In many cases, facilities have the space for more customers but don't have enough power for them. Here are some examples of questions your business partners and IT executives may be asking: • Does IT support the achievement of business objectives? This report shows the success of that effort and quantifies the improvement: You can see a significant reduction in the number of tickets being opened. But the cleaning of the facilities or the factory concierge do not directly affect the quality of the product. This is a laudable goal, but it is too vague to take concrete steps towards achievement. There are efficiency ratios used to measure production or financial efficiency, or a combination of both. Plus 2 more steps to achieve operational efficiency: Study your KPI spreadsheets or other systems you use to track them and make sure goals are being met. Below is a sampling of different types of efficiency, quality, and value reports. One advantage of being an SMB is the ability to react more quickly than larger competitors. Operational efficiency is about doing things right. • Are IT services delivered at a competitive cost? Six extra seconds may not seem like a lot. Efficiency at work can only be achieved through the efficient exchange of information in real time and a lot of teamwork, integration and collaboration. Efficiency – “A measure of whether the right amount of resources have been used to deliver a process, service or activity. • Is IT helping my team to be more productive? Additional information is needed to assess whether they are doing well or whether action needs to be taken. IT should not define business (value) reports without consulting business partners! This automation saves four seconds per order, which gives the restaurant back four hours of processing (or taking more orders) per day . There are two ways to measure this. For example: services, customer services, delivery, and quality control can be key processes in your business. IT makes a change so that the order automatically posts and the screen refreshes automatically. If you don’t currently have reports that answer the questions, determine what data would be needed to tell the story or provide the answers. Once you collect the questions, you can begin looking at your current metrics and reports. The following are common examples. Want to achieve operational efficiency in your business without making mistakes like this? If your management or business partners are only asking for a few specific reports, deliver them; don’t feel compelled to deliver more than what they ask for. Improving operational efficiency begins with measuring it. Similar to companies in other sectors, banks have specific ratios to measure profitability and efficiency that are designed to suit their unique business operations. RTY is a great KPI to track as it alerts manufacturers to the health of their entire operation, rolling all processes into a single measurement. There is a cause-and-effect relationship between the primary and the business metrics. We recommend focusing on these four key things as a jumping off point: 1. A predictive maintenance programme – servicing machines based on need-based early stage notifications – is much more efficient than a Fixed Time Maintenance (FTM) Preventative Programme. • Does IT contribute to the achievement of our business strategies? IT can take this a step further to help to identify bottlenecks by providing report break downs by the type of wait time: IT could then overlay the patient experience reports with network status during those same timeframes (and across different locations) to begin to assess the root cause and analyze further. Document Control - The ability to find necessary documents as easily as possible is a crucial part of operational efficiency. Trending reports are a necessity. Measuring employee efficiency makes it possible to pinpoint areas where work slows. Reducing operational costs means approaching maintenance in a new way. While the process of developing these metrics can be a bit challenging, the positive outcome is worth it. Assuming that your categorization allows you to trend on those services or people, you can run a high-level trending report to see the number of tickets received from that business unit that are related to those services. 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